Value Proposition:
This is not a “theoretical policy paper,” but an operational guide that connects
contract → costs → percentage of completion → recognized revenue → financial statements.
The goal: to recognize revenue that is auditable, consistent with IFRS 15, and prevents revenue inflation or unjustified deferral.

In 20 seconds: What will you get?

• Revenue Recognition Policy written for projects.
• Application of POC (Percentage of Completion) in accordance with IFRS 15.
• Practical explanation of the Cost-to-Cost Method.
• Mechanism for calculating recognized revenue monthly.
• Accounting treatment of Under / Over Billing.
• Policy for handling Claims & Variations as Variable Consideration.
• Linking the policy with WIP and the Trial Balance.
• Practical examples + typical Journal Entries.

Suitable for

• Construction and project companies.
• Long-term service companies.
• Financial managers and heads of accounts.
• Entities subject to external audit.

Not Suitable for

• Activities with immediate sale (Point-in-Time).
• Companies that do not track project costs.

Before Implementing the Policy

• Revenue recognized only upon invoicing.
• Unjustified inflation or deferral of revenue.
• Continuous discrepancies with the external auditor.
• Lack of a clear methodology for calculating WIP.
• Random handling of claims and changes.

After Implementing the Policy

• Accounting Consistency: The same methodology every month and for every project.
• Auditability: Revenue supported by costs and percentage of completion.

How does the Revenue Recognition Policy work in practice?

1) Determine if the contract is subject to POC

• The contract is executed over a period of time.
• The customer has gradual control over the benefit.
• Costs and revenue can be measured reliably.

2) Determine the method for measuring the percentage of completion

The policy is based on the Cost-to-Cost Method:

• Percentage of completion = costs incurred ÷ total estimated costs.
• Regular updates to total costs (EAC).

3) Calculate recognized revenue

• Recognized revenue = contract value × percentage of completion.
• Revenue for the period = cumulative revenue − previously recognized revenue.

4) Handling Under / Over Billing

• Under Billing: Recognized revenue > issued invoices → Current asset (WIP).
• Over Billing: Issued invoices > recognized revenue → liability.

5) Claims & Variations as Variable Consideration

• Not recognized unless collection is highly probable.
• Included at the weighted or most likely value.
• Exclude high-risk claims from revenue.

Accounting Output from Implementing the Policy

• Project revenue compliant with IFRS 15.
• Clear and explained WIP balance.
• Traceable Under / Over Billing.
• Standard monthly closing entries.
• File ready for external audit.

Delivery Contents

1. Revenue Recognition Policy: A formal written policy.
2. POC Methodology: Explanation of Cost-to-Cost.
3. Variable Consideration Guidance: Claims & Variations.
4. Journal Entries: Typical accounting entries.
5. Examples: Practical numerical examples.

If you want a revenue policy that won’t be rejected by the auditor and won’t distort the financial statements

Download the Revenue Recognition Policy for Projects now